Now, that doesn't mean that we just go spend all the money in the world. We need to do our part on the home front. We need to get the economy on track. A government in this country will never be the fix, the system is not set up like that. Realize that the US government is the longest lasting unchanged system in the history of the world, even tho our country is not the oldest or longest lasting. This all goes back the foundation- the founding fathers. They set it up to last, and we need to keep that in mind. Obviously things have changed, but we need to keep those founding priciples. Our government will not (or should not) take care of you, you have to take care of you.
I've highlighted the point I want to address. The US economy, namely the stock market, is
cyclical in nature. Since records have been kept documenting the stock market, the economy swings up and then swings down, swings up, then down. It repeats itself. And anytime we have a large upswing, there is a resounding bottom out.
Within your time frame let me point out the Tech bubble. Tech stocks became way over-valued and eventually the market had to correct itself. A lot of people lost a lot of money. It was the end of the world as we knew it.
Now to the present. The banks loaned money to people that did not have the means to keep up with the ARM's that they were approved for. And then the banks took these securities and put them in groups or funds. These funds were highly valuated, purchased by many companies banks included. However, the funds themselves weren't actually worth anything. They were drastically overvalued (kind of similar to the tech bubble). Well there was only one possible outcome.
The people who had taken out loans above their means started to foreclose on their homes. It started in a trickle and eventually became a downpour. This is bad for the banking system because they lose money when someone forecloses. But what really tanked the system is that these over-inflated funds were realized for what they were...empty air. This caused the banks to take a drastic write off. People panicked, the media fed the frenzy, and a large sell-off of stocks began similar to the Great Depression. Now there are companies out there who are fairly valued at $200 a share, trading for $50 a share. For no other reason than people panicked.
Now it's been drummed up that we are in a recession, that everyone needs to panic. The Sky is Falling! The Sky is Falling! seems to be the cry heard daily on the news. So people react emotionally, instead of logically working it through their small skulls. Everyone tightens up the wallets. Stops spending the money that they typically spend. This presents a problem for companies that sell product, because now orders have dropped. They have to cut back, laying off employees. More Panic! It's a vicious circle.
However, companies will lean themselves out. Banks will begin to lend again. People will be forced to be more fiscally responsible. Owning a home will not be a god-given right for everyone anymore, it will be something that you have to save and plan for. Like it was supposed to be. The market will bottom out, the panic will subside, and we will begin the long arduous trek out of the bottom of the cycle we are currently in and five years from now it will be a thing of the past, long forgotten by most, and the economy will once again be on the rise to the crest. And eventually it will return to a bottom.
It's the nature of capitalism and our market. :usa2: